In the past five years, 11 public sector banks across India have collectively imposed penalties amounting to nearly ₹9,000 crore on customers for failing to maintain the stipulated average balance in their savings accounts. While some banks levied these charges on a monthly cycle, others enforced them quarterly. Notably, certain account categories including the Pradhan Mantri Jan Dhan Yojana accounts, Basic Savings Bank Deposit Accounts (BSBDA), and salary accounts remain exempt from the minimum balance requirement. Even after advisories by the government to rationalize the minimum average balance (MAB) requirements, several public sector and most private banks appear to be in no hurry to comply.
Private Banks Resist Push for Fairer Penalty Rules
Responding to a question in the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary revealed that the Department of Financial Services (DFS) had issued an advisory to all banks urging them to reconsider and ease the penalties imposed for not maintaining the minimum average balance (MAB), especially for account holders in semi-urban and rural regions. The banks are resisting the push from the government as only 7 out of 11 government banks have followed this advice and The other 4 banks have also said that they will do so soon. But many private banks are not doing so. However, many private banks appear reluctant to follow suit continuing to levy these charges despite the government’s nudge toward more customer-friendly policies.
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Why Are the Penalties Still in Place?
RBI regulations grant banks the autonomy to determine penalty rates, provided they align with board-approved internal policies. According to the guidelines, any such penalty must be a proportionate charge based on the shortfall between the account’s actual balance and the agreed-upon minimum at the time of account opening. In practice, customers are facing arbitrary deductions without adequate communication or transparency raising concerns about fairness, especially for low-income and rural account holders.